Superannuation underpayments: The amnesty window is closing

On 24 February 2020 Federal parliament finally passed the bill (first introduced in September 2019) to provide an amnesty to employers who have not met their superannuation obligations to employees.¹ The aim is to motivate employers to self-disclose and rectify certain historical underpayments without attracting the penalties and administration charge that would otherwise be imposed by the ATO.

However, the amnesty will only be available for a further six months, only applies to underpayments made in relation to a period prior to 1 April 2018, and is subject to other provisos.

For those employers who are not 100% confident they have met all of their superannuation obligations, we consider it would be prudent to review payroll compliance so that, if there has been an inadvertent shortfall, they can take advantage of the amnesty. In our experience, many employers are confused by what is, and what is not, included in ‘ordinary time earnings’ on which superannuation is payable. Further, higher penalties are likely to apply to employers who do not come forward during the amnesty and later discover an historical underpayment.

In order to qualify for the amnesty:

• an employer must disclose the shortfall to the ATO in the approved form during the amnesty period – this period commenced on 24 May 2018 (when it was first publically announced) and will end 6 months from when the Act receives Royal Assent (so, around the end of August 2020);
• the disclosure must be original – it cannot relate to a previous disclosure;
• the underpayment must be in relation to a quarter prior to the quarter starting on 1 April 2018 ie an employer cannot benefit from the amnesty for an underpayment relating to a quarter starting on or after 1 April 2018. This ensures that the amnesty addresses historical non-compliance and is not available for non-compliance that occurred after the amnesty was first announced.

Where a shortfall qualifies for the amnesty, the employer:

• can claim deductions in respect of payments made to rectify the shortfall;
• will not be liable to pay the administrative charge in respect of the shortfall; and
• will not be penalised for failing to lodge the required statement by the due date.

We can assist you in identifying any potential superannuation underpayments and provide advice on how to disclose this to the ATO.